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3 Common Myths About SBA Loans

Financing growth is an issue every business faces. Whether it is operating capital, equipment, real estate, or acquiring another business, many companies need increased capital to keep moving in the right direction. Access to capital is critical for small businesses who have limited assets to leverage for growth.

The United States government formed the Small Business Administration (SBA) to help solve this problem. The SBA facilitates lending in order “to maintain and strengthen the nation’s economy by enabling the establishment and viability of small businesses.”

Many business owners are unaware of the advantages and opportunities available to them through the SBA due to many common myths surrounding their lending programs. Here are three common myths related to SBA loans:

Myth #1 – Taxpayers fund SBA Loans

The SBA does not use taxpayer money to fund their loans. Instead, the SBA guarantees these loans. Taxpayer money is utilized to cover losses when a business defaults on a loan. The default rate on SBA loans is approximately 2%, and the SBA is presently operating at a zero subsidy. Borrower and Lender fees enable the SBA to be self-supporting and efficiently run.

The SBA makes loans through SBA licensed lenders and provides a government-backed guarantee to its lending partners. The SBA incentivizes banks to lend to small businesses who might not be able to access a conventional loan due to certain credit factors. Many small businesses do not have the credit history or collateral to qualify for a traditional loan. The SBA enables banks to finance small business growth using a different set of underwriting criteria.

You apply for an SBA loan through preferred lenders like Atlantic Capital Bank. The bank works with businesses to complete the loan application. The bank, like all preferred lenders, can approve the loan and receive a guaranty from the SBA. As a result, the bank’s risk is reduced, and businesses gain access to capital.

Myth #2 – SBA Loans Are Always Small Loans

It all depends on what you mean by “small.” In 2017, the average SBA loan size was $407,616. However, 34% of all SBA loans were more than $2 million per loan.

Many business owners think the SBA only exists to help a small restaurant purchase a new piece of equipment for their kitchen. The SBA loan programs fund businesses of all sizes and types. The loans range from $25,000 to $5 million. Companies can use the loan for startup expenses as well as purchasing new land, repairing existing equipment, buying an existing business, refinancing existing debt, or obtaining machinery.

The “small” in the Small Business Administration isn’t measured in the way a business might typically think. Your business can have up to 500 employees and still qualify for SBA loan programs. Generally, a small business is independently owned and not nationally dominant in its industry.

Jeff Roegge, SVP Head of SBA Lending has helped small businesses secure more than $1 billion in loans through SBA lending programs. “SBA loans create opportunities for small business owners to finance growth. From my experience, business owners are drawn to SBA loans because they offer more favorable terms than a conventional loan. Business owners often need financing to generate more topline revenue growth and improve their operational efficiency. However, they often have less collateral than larger companies and need longer amortization schedules. The SBA loan programs were created with them in mind.”

Myth #3 – The SBA Only Offers Money

False. The SBA recognizes the success of any business requires more than capital. The SBA funds Small Business Development Centers (SBDC) which provide small businesses with free training and consulting. They are located in every state and assist new businesses as well as existing ones.

Every business needs technical assistance as much as it does financial assistance. The SBDC exists to provide counsel for business owners on issues ranging from bookkeeping to marketing and compliance with government regulations. They also offer networking opportunities for business owners to connect with one another.

Atlantic Capital Bank has helped small businesses secure over $185 million in SBA loans, ranging from $100,000 to $10 million. Our bankers are experienced in helping small business access capital to compete and grow in their respective markets. Contact Jeff Roegge at to keep your small business moving in the right direction.

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